Rent seekers in Pertamina<\/p>\n
State oil company Pertamina's questionable plan to sell two
\nvery large crude carriers currently under construction Hyundai
\nHeavy Industries shipyards in Ulsan, South Korea, and the
\ncontroversial overseas trip by 15 House of Representatives (DPR)
\nmembers last week to assess the planned deal only confirmed
\nrumors that rent seekers have again set up shop in the giant
\ncompany.<\/p>\n
Contradictory explanations from Pertamina executives and House
\noil and energy commission members about the three-day "working
\nvisit" to Korea and Hong Kong strengthened suspicions that the
\nstate oil company has been going all out to lobby the House to
\napprove the questionable transaction.<\/p>\n
Pertamina's deputy director for shipping, Dedeng Wahyu Edi,
\ntold reporters last Friday that the visit had been arranged by
\nPertamina to allow House members to gather more information on
\nthe merits of the planned sale from Goldman Sachs, Pertamina's
\nconsultant for the deal in Hong Kong, and from Hyundai
\nshipbuilders in Korea.<\/p>\n
However, a spokesman for Pertamina said on Sunday that the
\noverseas trip was made wholly at the initiative and at the
\nexpense of the House. But many members of the commission who did
\nnot take part in the trip said they had not been informed about
\nit. Strange too was that fact that even staffers in the
\ncommission's secretariat were in the dark about the trip, which
\nwas led by the commission's chairman, Irwan Prayitno. What also
\nraised many eyebrows was the fact that several House members
\nbrought along their wives for what was supposed to be a tightly
\nscheduled three-day working visit.<\/p>\n
Pertamina appears to be highly vulnerable to once again
\nbecoming a cash cow for senior officials and politicians,
\nespecially since the installation last September of new
\nmanagement headed by Ariffi Nawai and a new board of
\ncommissioners chaired by the State Minister for State Enterprises
\nLaksamana Sukardi, a leader of the Indonesian Democratic Party of
\nStruggle (PDI-P) and a close confidante of President Megawati
\nSoekarnoputri.<\/p>\n
Nawawi, a career executive at Pertamina, replaced Baihaki
\nHakim, a former chief executive officer of PT Caltex Indonesia,
\nwho was appointed by then president Abdurrahman Wahid in February
\n2000 to rid the state company of its extensive, deeply-rooted web
\nof corruption.<\/p>\n
The allegations that rent seekers are once again getting
\nlucrative, collusive deals from Pertamina appear more credible
\nafter Pertamina disclosed last month its plan to sell two
\n260,000-ton tankers, which Baihaki ordered from Hyundai at a cost
\nof US$130 million early last year.<\/p>\n
These tanker purchases were an integral part of Baihaki's
\nconcerted efforts to eliminate mafia-type, collusive business
\npractices that had been milking the company of hundreds of
\nmillions of dollars in excessive tanker charges. This corrupt
\ntanker chartering system formed part of the thick layer of
\ncorruption that independent auditor PriceWaterhouseCoopers
\nidentified in a special audit of the company conducted at
\ngovernment request in 1999.<\/p>\n
The auditors found US$6.1 billion in direct losses and the
\nloss of potential savings caused by inefficiencies and collusive
\nbusiness practices between April 1996 and March 1998. Hundreds of
\nmillions of dollars of these losses stemmed from long-term time
\ncharter contract rates that Pertamina was paying, normally at a
\n32-36 percent premium above market rates.<\/p>\n
Armed with this audit report, Baihaki moved to improve
\nPertamina's bidding regime for tanker charters by inviting
\nforeign operators to participate and by gradually rebuilding the
\ncompany's fleet through the procurement of new tankers, including
\nthe two large carriers ordered from South Korea. But this move
\nseems to have angered the businesspeople who formerly reaped huge
\nprofits from their collusive tanker deals with Pertamina, and
\nwere responsible for Baihaki's ouster from the company.<\/p>\n
As it happened, Ariffi moved immediately to retrench on
\nPertamina's tanker procurement, arguing that chartering tankers
\non the open market would be more efficient and appropriate to the
\ncompany's financial situation. But Pertamina's trade union,
\nsupported by many analysts, do not accept Ariffi's rationale,
\nconsidering the latest move only a subterfuge for a return to the
\ncompany's old, corrupt tanker chartering system.<\/p>\n
Ariffi's argument that Pertamina cannot afford the two large
\ntankers and that oil shipping is not part of the company's core
\nbusiness appears weak and illogical. Pertamina should instead
\nstrengthen its transportation fleet to remain competitive in the
\ndomestic market, which will soon be opened up to foreign firms
\nunder the new oil and gas law.<\/p>\n
Ariffi also seems to be inconsistent in his stance. He said
\nafter his installation last September that he would focus on
\nimproving the marketing of oil fuels and petrochemical products.
\nHow can he hope to strengthen Pertamina's marketing system
\nwithout the support of an efficient and reliable transportation
\nfleet, including tankers, especially now that the country has
\nbecome a net oil importer?<\/p>",
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